SCT Comes Back With a Vengeance

According to a July press release, SCT Corporation, an IT solutions provider
for a number of disparate industries, announced that the quarter which
ended June 30, 2000, was a record quarter for license fee revenue within
SCT's process industry solutions business. Total license fee revenue for
the third quarter represented a 59 percent increase from the previous
quarter, and nearly 100 percent increase over the third quarter of 1999.
License fees for the quarter were 22 percent higher than the previous
record high.

"We
are experiencing a tremendous interest in our iProcess.sct solution as
a direct result of an increase in e-business initiatives," said Roy Zatcoff,
president of SCT's process industry solutions business. "Process manufacturers
are not only looking to SCT for its sell-side e-business applications,
but also for supply chain solutions that ensure that Internet commitments
are executed as promised, and supply chain relationships are strengthened.
SCT's supply chain solutions are a fundamental component of the e-business
vision for the food, beverage, chemical, pharmaceutical, and consumer
packaged goods industries."

SCT,
which claims experiencing continued success with enterprise-wide, global
accounts in the process industries, now has eight out of the top 16 food
processors in North America as clients. Some of the new license fees contributing
to the record quarter include agreements with Valvoline (a division of
Ashland), Miller Brewing, Foodbrands (a division of IBP), FIS North America
(a subsidiary of Nestle), Wayne Farms (a division of Continental Grain),
and Coca-Cola North America Fountain. In addition, SCT signed distribution
agreements with TRW Integrated Supply Chain Solutions in Spain, Portugal,
and Italy, and DSQ Information Technology Limited in India and Sri Lanka
to resell iProcess.sct.

Earlier,
on July 17, SCT announced its financial results for the third quarter
and first nine months of fiscal 2000, which ended June 30, 2000. Third
quarter 2000 diluted earnings per share (EPS) were a record $.32, which
included $.10 resulting from the sale of the Company's eFile Management
middleware and SCT Learning Suite products. Without the sales, diluted
earnings per share would have been $.22. For the same quarter last year,
diluted earnings per share were $.20.

Revenue
for the quarter was $119,941,000, which included a gain of $6,430,000
from the aforementioned sale, compared to $120,245,000 in the same quarter
of fiscal 1999. Income before taxes was $19,292,000, which would have
been $12,862,000 without the sale of the assets, compared with $11,886,000
for the third quarter of 1999. Net income for the period was $11,298,000,
which would have been $7,532,000 without the sale of the assets, versus
a net income of $6,442,000 for the same period last year, an increase
of 75% (17% without the sale of the assets).

Figure
1.

"We
are extremely pleased with the turnaround we achieved in our second and
third quarters of fiscal 2000," said Michael J. Emmi, SCT's Chairman and
CEO. "We are encouraged by the acceptance of our e-business solutions
by our clients especially Tier 1 global process manufacturers. Also, we
appreciate our partners' recognition that SCT's solid relationships enable
us to successfully deliver their e-business solutions to our clients and
their customers."

SCT's
global energy, utility and communications unit achieved its second highest
quarterly revenue, with license fees increasing 37% over the third quarter
of 1999. SCT signed significant licenses with IBM Global Services for
The New Power Company and Vectren Resources LLC, a subsidiary of Vectren
Corporation. With three more utilities going live, SCT's European clients
now support over one million customers with Banner CIS, its flagship
vertical industry product.

SCT's
global government solutions unit signed significant court licenses in
Ohio and Tennessee, and its second international court license agreement.
SCT's global education solutions unit signed several new international
licenses, and signed major licenses in West Virginia, Oklahoma, Massachusetts,
Colorado, and Nevada. SCT and WebCT announced their exclusive arrangement
to extend market leadership in e-Learning to the higher education market.

Market
Impact

SCT has been thriving mostly due to its sharp focus within underserved
industries, process manufacturing being one. While being a traditionally
well-run company (See Figure 2), SCT's process industry division has significantly
repositioned and extended itself over the last year. When the company
first entered the process manufacturing scene a few years ago, it provided
only Adage, its flagship ERP suite. Through 1998 acquisition of Fygir
Logistic Information Systems B.V., it subsequently became involved in
supply-chain applications, and most recently developed and introduced
e-business components.

Figure
2.

The
company's major product introduction was the recent launch of its iProcess.sct
solution, a business-to-business e-commerce suite designed to enable process
manufacturers and distributors to leverage the Internet to strengthen
existing supply-chain relationships and/or utilize new channels of distribution.
iProcess.sct binds together SCT's Adage Supply Chain Execution software,
the advanced planning features of the Fygir SCM suite and ecFoods' Internet
Trading Exchange. SCT claims the tight integration of these components
although each individual component can be deployed stand-alone as a point
solution. The company cites a significant penetration within SAP's customer
base in process industries, where its product complements traditionally
strong SAP's back-office functionality.

The
flagship ERP product, Adage, serves as the transactional backbone for
the iProcess.sct solution and its functionality is laid down from a business
process perspective. It supports the following major business processes:
Design to Deploy, Plan to Produce, Order to Cash, Procure to Pay, and
Manage the Enterprise. Optimization is subsequently handled by Fygir,
which consists of modules for advanced planning, advanced scheduling,
and demand planning. It enables users to improve their supply chain management
performance and make their manufacturing process more efficient by applying
mathematical techniques to optimize the supply chain.

SCT
Internet Business Suite's first component is iOrder.sct, a Web-based sell-side
application that provides self-service order management, and relevant
order status and process industry-specific parameters (e.g., catch weights,
lot tracing) visibility. It also provides customer service functionality
such as rebate promotion tracking and account management. Collaboration
with ecFoods represents SCT's first step in developing trading exchange
partnerships for multiple verticals, including consumer-packaged goods
(CPG), chemicals and pharmaceutical industries.

However,
despite its breadth, iProcess.sct does not cover all the bases. International
financials, distribution requirements planning & transportation, warehousing,
e-procurement, product life cycle (PLC), and plant maintenance are some
of functionality that competitors, like Ross Systems, Wonderware, and
Infinium may tout as superior. The market should expect SCT's remedial
actions in that regard. The company also plans to shortly launch two new
components, Customer Relationship Management (CRM) and Analytics.

User
Recommendations

SCT's target market, process manufacturing companies in the $50 million
- $1 billion-a-year revenue range, should certainly consider the company's
latest product offering, both as an integrated bundle and on a component
base, but avoid selecting it without looking at what the other vendors
have to offer. We generally recommend including SCT in a long list of
an enterprise application selection to medium-complexity process manufacturers
and consumer-oriented distributors where order entry and fulfillment functionality
are of main importance. Users needing more complex process manufacturing
and distribution functionality may benefit from either considering other,
more comprehensive products or from contemplating 3rd-party complementary
components.

Customers
should insist on a contractual timeframe for delivery of a solution, and
seek reference sites (preferably in their vertical market space), which
have been successful with the product suite. Each e-business component
should be put through its paces using a well-documented set of requirements,
scripted scenario demonstrations, and rigorous reference checking. Users
will want to provide detailed scripted scenarios that mimic real business
processes encompassing all segments in the supply chain to SCT during
vendor evaluation and then expect a demonstration that addresses each
step in the scenarios. Though time consuming, the preparation demanded
by a diligent selection will invariably produce better results - and less
headaches.